The forced business
closures and layoffs caused by the coronavirus pandemic have
taken a massive toll. With the unemployment rate now
predicted to surpass 20%, community associations are bracing
for severe financial strains from unit owners who become
unable to pay their monthly dues. For association boards of
directors, all options will be on the table, but they should
seek the guidance of qualified professionals to avoid any
actions that may cause more harm than good.
As they begin to consider their options, some associations
are now giving thought to relaxing their collections by
waiving late fees and interest on delinquencies, and perhaps
also foregoing entire monthly payments for those who become
unable to pay due to the economic standstill. While this may
appear to be a reasonable response, association directors
must not lose sight of the fact that they are fiduciarily
obligated to pursue the uniform collection of all payments
and delinquencies, so they may be limited in their ability
to offer any special considerations or concessions for those
experiencing financial difficulties.
Payment waivers for the economic casualties of the COVID-19
pandemic could also open the door to future requests by unit
owners for similar concessions related to other financial
setbacks.
Instead, associations could borrow a page from the playbook
of previous economic downturns and consider sanctioning a
uniform payment plan to assist owners who become delinquent.
With the help of qualified legal counsel and financial
professionals, they could create a payment plan that is
uniformly available to assist all the unit owners who
suddenly become unemployed.
Associations should also be prepared to pare back their
expenses and take a hard look at their budgets for the
coming year for any expenditures that may be eliminated,
deferred or reduced. Renovation projects that are not urgent
or were planned solely to improve on existing amenities and
common areas, such as a fitness center or landscaping
makeovers, could be postponed. Also, some vendors may be
willing to work with their association clients to modify
existing agreements during the slowdown and recovery.
Some associations may find that they are able to tap their
existing financial reserves to continue paying all their
necessary expenses. For those that are not able to do so or
do not wish to deplete their reserves beyond a certain
level, the Small Business Administration’s Economic Injury
Disaster Loan program initially began offering loans of up
to $2 million for 30-year payment terms capped at a low 2.75
percent for nonprofits such as community associations. Once
the initial round of emergency funding was extinguished, the
SBA temporarily limited the program only to agricultural
businesses. Associations should monitor its status at
www.sba.gov or contact the agency for any updates if they
wish to apply.